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Does my credit rating affect my insurance?

Auto Insurance

By Anne Valentino | March 6, 2018

Does my credit rating affect my insurance?

Yes your credit rating does in fact affect your insurance . A credit rating is an indication of how well you pay your bills: do you pay on time or are you always late? Credit rating is not about how much money you have it’s about how responsible you are in managing your credit. Your insurer via your credit score can get a better sense of what type of customer you are. This is not the sole criteria that your insurance company will use to determine your premiums however this is yet another reason why it’s important to keep your credit rating in good standing.

Does this credit check impact my credit rating?

No as this credit check is what is known as a “soft hit.” It checks your score just like a cell phone or utility company would do. It’s very common and the check itself has zero impact on you or your credit.

Are There Any Restrictions As Far As Insurers Using My Credit?

In certain provinces there are restrictions on the use of a customer’s credit rating for setting premiums particularly with respect to automobile insurance. Beyond the few provinces in which the utilization of credit scores is not allowed, the Insurance Bureau of Canada (IBC) set in place a specific code of conduct for how exactly credit ratings can be utilized by insurance companies. It is as follows:

  • Before your insurer can collect your credit information they need to get your express consent to do so. This consent is given when you sign an insurance application.
  • If you do not consent to let them access your credit rating they cannot deny or refuse you coverage on the basis of this refusal alone. However keep in mind that you may be missing out on some premium discounts. Insurance companies don’t surcharge you based on your credit score but you might get a break in the costs if your score is good.
  • Sometimes life happens and our credit rating takes a hit. The IBC provides guidance for those who do believe that their credit was negatively impacted as a result of exceptional circumstances.
  • For those customers who currently do not have a credit history the insurer must then base underwriting decisions on other forms of information and documentation they are able to obtain.

The reasoning behind this Code is to help make sure that insurance companies are using any credit related information in the most transparent way possible. Client privacy is incredibly important and should always be protected. If you want to know more about how your insurer is factoring in your credit score do not hesitate to talk to your broker about any concerns you might have.

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